Milk prices hitting dairy farmers hard

With unprocessed milk prices at the lowest many dairy farmers in Roosevelt and Curry counties have ever seen, they are borrowing against the equity in their operations or going out of business.

Milk prices are half of what they were a year ago.

“Everybody’s losing their tail,” said Michelle Heavyside, whose family runs Greenfield Park Dairy on Cacahuate Road. “But you know, you just have to hope and pray for the best.”

Albin Smith, who owns dairies in Curry and Roosevelt counties, said the prices are lower now than when he came to New Mexico in 1976, and costs are probably three times higher.

Dairy farmers are taking out loans against their equity to pay bills, he said.

If the amount of their loans reaches the amount of their equity, they can’t borrow any more.

Dairy Farmers of America Membership Manager Brian Harris said several dairies have gone out of business in the past nine months. Milk prices have been dropping for four or five months, he said.

Portales dairyman Gary Bonestroo expects to lose $500,000 to $1 million in the next nine months, depending on when prices increase.

“Dairymen are losing six figures-plus a month as far as price comparison goes,” he said.

When dairy farmers don’t have money, Bonestroo said, it affects everyone in the community because they’re not putting as much into the local economy.

Many dairy farmers are locked into expensive feed contracts, Bonestroo said, although the decrease in diesel prices has cut his bill for that cost in half compared to last summer.

Low interest rates are also helping dairy farmers refinance and get loans to pay the bills, he said. Bonestroo said Curry and Roosevelt county dairymen are also fortunate because the economic problems haven’t hit the area as hard as in some other places.

Store prices for milk are still high, but are starting to drop, he said. Lower prices mean better sales, which would help dairy farmers.

Bonestroo said cheese is selling well, which could benefit dairy farmers. People like cheese, and they’re using more because they aren’t eating out now, he said.

Smith said fluctuations in milk prices are normal, but not to the current extreme. The highest and lowest prices used to vary by $4 or $5, but now they vary by $10, he said.

The low prices come from a 2 percent excess in supply due to lower demand in the export market, Smith said.

“We are price takers, not price setters,” he said.

Agricultural producers receive whatever price the market sets and have no ability to control the price or set profit margins.

Bonestroo said he hopes to see prices turn around in the late summer or early fall, but that will be too late for some dairies. Heavyside said she had heard prices might go up by the third quarter or it might not happen until 2010.

Smith was optimistic about the future.

“It will get better,” he said, adding that it would be hard in the meantime.

Smith said it will take some time for dairy farmers to recover because they would have used much of their equity.